SanDisk Finds Profit Behind the Tech Curve

Flash-memory maker SanDisk Corp. rode several waves of transformation in the storage market to an "unforgettable" day on Wall Street after it predicted its gross margins would rise to 49 percent.

SanDisk led the S&P 500 rankings midday Thursday, April 17, with a 9.3 percent surge in stock price following an earnings announcement released late Wednesday showing that its mix of high-end enterprise and low-end mobile storage products fit all the right niches in a storage market evolving in several different directions at once.

The $1.51 billion in revenue Sandisk reported for the first quarter was just 1.3 percent above analyst expectations, but its projected profit was 71 percent higher than the same period last year at $1.44 per share, blowing away the $1.25 per share Wall Street expected.

The main reason for the big surprise was the increasing demand for solid-state drive (SSD) to replace or enhance hard drives in laptops and, most especially, in servers and high-performance storage devices in corporate datacenters.

Only 20 percent of gross revenues came from the sale of enterprise SSDs during the fourth quarter of 2013, and only 10 percent in 2012, according to Forbes.

That helped sales of SanDisk flash ships embedded in USB devices and smartphones, including the Apple iPhone 5 for which it supplies microSD cards, as well as raising the demand for SSDs.

Sales of SSDs for desktop and laptop computers grew 19 percent during the first calendar quarter of this year, according to StorageNewsletter.com.

Sales of enterprise SSDs -- designed for hybrid disk-and-flash storage or for all-solid-state-arrays, especially for performance-sensitive cloud-services companies -- grew from 5.44 million units in 2012 to 9.52 million in 2013 and are on track to hit 13.8 million during 2014, according to market-analyst firm Trefis.com.

The August 2013 acquisition of Smart Storage Systems helped SanDisk keep up with the volume required in the growing market for NAND memory.

SanDisk took advantage of the shift and the increasing emphasis on cloud computing by introducing a new series of SSD-based products called CloudSpeed Serial ATA, which are based on high-performing 19nm-process SATA SSDs designed to stand up to 10 full-drive writes per day, are guaranteed for five years, and come in sizes of between 100GB and 800GB per unit.

SSDs are not, as Samsung implies in its CloudSpeed press release, the future of storage in the cloud or datacenter, according to Jim Handy, director of analyst firm Objective Analysis, in an April 11 column for EETimes.

NAND-based SSDs provide memory, not storage, though speed- and price-comparison tests done by Objective Analysis in 2011 showed a GB of flash delivered a better performance boost than a GB of DRAM to servers already configured with enough memory to handle the workloads they'd been given.

SanDisk/Toshiba stock is flying high because analysts' recommendation, but the revenue, thus the profit level will be stagnate due to price erosion. Sandisk/Toshiba is not a low cost company, with Samsung, MU/Intel and Hynix coming to the market in a big way, the NAND price will be coming down in a hurry. SanDisk does not have any secret source to the SSD for memory nor NAND manufacturing process, why should SNDK share price deserve 20 times earning while the others are in low teen's?

Flash can only write 16KB blocks and erase 128KB blocks, ie. much larger than disk sectors. SSDs maintain an internal mapping of the disk blocks, combine multiple writes into a single block write and perform garbage collection to reclaim dead blocks. Typically 5-10% of the total flash is reserved to minimize the wear on the flash blocks.

To give you an idea how well this works in practice, my main drive is an 128GB SSD, and after 1TB written has a wear level count of just 25. It has a guaranteed wear level of 3000, and so can still write 120 times as much.

Hmm, if I don't start writing a LOT more data soon then I will wear out long before my SSD does!

I note the 'SATA SSDs designed to stand up to 10 full-drive writes per day, are guaranteed for five years'. My recollection is that this technology is susceptable to failure if written too many times. If there are specific sectors on the SSD that are experiencing frequently rewritten data, will they fail or is there a mechanism to protect the disk data integrity? This might be accomplished by using logical mapping which move the activity elsewhere on the disk or by limiting the number of write cycles to a given sector. Alternatively, the system might simply monitor sectors for failures and then remove them from the logical record pool once they're identified as bad (while remapping the data elsewhere).